Exploring the Links Between Corruption and Growth

Abstract

This paper models the transmission channels through which corruption indirectly affects growth. Results suggest that corruption hinders growth through its adverse effects on investment, human capital, and political instability, while fostering growth by reducing government consumption and, less robustly, increasing trade openness. Overall, a total negative effect of corruption on growth is estimated from these channels. These effects are found to be robust to modifications in model specification, sample coverage, and estimation techniques as well as tests for model exhaustiveness. The negative effect of corruption on growth is found to diminish in economies with low governance levels or a high degree of regulation. No one-size-fits-all policy response appears supportable.

Impact of corruption on GDP per capita through international migration: an empirical investigation

“…Their study shows that the coefficient of corruption in the growth regression is highly insignificant (Pellegrini and Gerlagh (2004); Table 1, p. 434, regression 3). Recently, Hodge et al (2011) empirically model the link between corruption and economic growth through various transmission channels by employing cross-country data for 81 countries for the time period 1984-2005 using a simultaneous equation framework. The study finds that corruption lowers economic growth by reducing investment, human capital, and political stability.…”

Determinants of Economic Growth in Southern Africa Development Community: The Role of Institutions

“…The negative effect of corruption on growth can either be direct or indirect as it works through other variables but this can be reduced in countries with low governance levels and high degrees of regulation, (Acemoglu and Verdier, 1998;Mo, 2001;Venard, 2013;Asiedu and Freeman, 2009;Farida and Ahmadi-Esfahani, 2006;Hodge et al, 2009;Mauro, 2004;Aidt, 2009;Gyimah -Brempong, 2001). Some studies argue that corruption enhances growth through reducing government consumption, facilitating efficient processing of projects and increasing trade openness.…”

Corruption in Uganda: Does this Have Anything to Do with Social Work?

“…This constitutes a big constraint for the country to fulfil its obligation of addressing this problem. Despite the human rights violations caused by corruption, Clague (2003) and Hodge et al (2011) have agreeably argued that corruption helps to overcome bureaucratic rigidities that characterises service delivery. However, social work being ethics centred profession, this argument makes less merit.…”